S.Korea opens beef market to Canada to expand auto exports

SEOUL, March 11 (Xinhua) -- South Korea opened its beef market to Canada by finalizing years of negotiations on their bilateral free trade agreement (FTA) Tuesday in order to expand exports to Canada of cars made by Hyundai Motor and Kia Motors.

Canadian Prime Minister Stephen Harper arrived in Seoul Monday evening to conclude the long-drawn-out FTA negotiations, which started in 2005, but later ground to a halt over disputes about import ban on Canadian beef.

South Korea imposed ban on Canadian beef imports in 2003 after cases of mad cow disease were reported in the North American country. Canada challenged the ban at the World Trade Organization in 2009.

The two countries held 13 rounds of FTA talks from July 2005 to March 2008, but the negotiations stalled in 2009 in the wake of Canada's petition at the WTO.

Seven rounds of closed-door talks for the FTA were held in 2012 after South Korea scrapped its nine-year-old ban on the Canadian beef, and the 14th round of FTA negotiation was resumed last November.

South Korean President Park Geun-hye and her Canadian counterpart Harper held a summit in Seoul to wrap up the bilateral FTA negotiations. The free trade pact, signed on Tuesday by trade ministers of both sides, was widely expected to take effect in 2015 after domestic procedures for the ratification.

"We are committed to finalizing the legal review and required domestic procedures expeditiously with the mutual intention that the agreement will enter into force as soon as possible," the ministers said in a joint declaration.

Under the deal, South Korea will remove a 40-percent tariff on Canadian beef within 15 years after the FTA takes effect, while eliminating a tariff of 22.5 to 25 percent on pork imported from Canada over the next 13 years.

The tariff removal will help Canadian beef and pork shippers raise their market shares in the South Korean market. After the implementation of the South Korea-U.S. FTA in March 2012, concerns spread among Canadian livestock farmers that they may be deprived of the South Korean market by U.S. producers.

In the South Korean import beef market, Australia held a 55.6 percent market share in 2013, trailed by the United States with a 34.7 percent share and New Zealand with 8.8 percent. Canada's share plunged to 0.6 percent.

Canadian and Australian beef with a zero tariff will be imported to South Korea from 2030 if free trade pacts with the two countries take effect next year. South Korea inked the free trade deal with Australia in December last year.

A presidential official said on condition of anonymity that consumption of homegrown beef has grown faster than the U.S. beef since the KORUS FTA took effect two years earlier, noting there was no big difference between Canadian and U.S. beef.

Instead of opening the livestock market, South Korea will gain ground in the Canadian auto market as the FTA will cut a 6.1 percent tariff on South Korean vehicles in two years after the FTA implementation.

Canada is South Korean automakers' fifth-largest export market, following the United States, Saudi Arabia, Russia and Australia. Among South Korea's total exports to Canada last year, autos accounted for more than 40 percent.

Despite the 6.1 percent tariff, South Korean automakers held a market share of 12 percent in Canada, followed by the United States with 44.5 percent, Japan with 33.6 percent in 2013.

The customs-free South Korean vehicles from 2017 would improve price competitiveness of cars manufactured by Hyundai Motor and Kia Motors in the Canadian market compared with Japan, which had yet to complete its free trade deal with Canada. The U.S.-made cars have already enjoyed price competitiveness in Canada thanks to the NAFTA launched in 1994.

A 6 percent tariff on imports of auto parts made by South Korean manufacturers will be eliminated within three years after the deal comes into force, with a 7 percent import duty on tires set to be removed in five years.

Most tariffs on South Korean textile goods, averaging 5.9 percent, will be removed within three years, with those on textile and chemical machines to be abolished in five years.

Import tariffs on TVs and washing machines made by South Korean companies will be removed immediately after the FTA implementation, and those on refrigerator will be abolished in three years.

South Korea's major export items, including mobile phones, semiconductors, steel and oil products, have already been subject to a zero tariff in Canada.

The South Korea-Canada FTA will remove tariffs on 97.5 percent of goods in both countries in 10 years after the FTA takes effect.

South Korea became the first Asian country to sign the free trade pact with Canada, which has reached free trade deals with nine countries. The nine deals were small in size except for the North American Free Trade Agreement (NAFTA).

Trade between the two countries stood merely at 9.9 billion U. S. dollars as of 2013 as Canada depends heavily on the NAFTA members for more than 60 percent of its trade.

The South Korean government expected the signing of the deal would expand its exports to Canada given the small volume of trade till now. Canada is a member of G8 advanced nations, and the world 's 11th-largest economy with a 1.8 trillion dollar gross domestic product in 2012.